Exchange-traded funds tracking the defense industry tumbled on Monday, suffering their biggest one-day decline in months after a tweet from President-elect Donald Trump prompted turbulence in one of the industry’s biggest players.

Lockheed Martin Corp.
LMT, +0.20%
tumbled 4.5%, its biggest one-day drop since Aug. 10, 2011, after Trump tweeted that costs for the F-35 stealth fighter, which is manufactured by Lockheed, were “out of control.”

The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.

Despite the move on the day, the ETFs remain strong performers for the year. Both the iShares and the SPDR fund are up more than 20%, while the PowerShares fund is up 18.4%. All three have easily outperformed the year-to-date rise of 10.3% for the S&P 500
SPX, +0.34%

Lockheed is the third-largest component of the iShares fund, comprising about 7.4% of the portfolio’s holdings. For the PowerShares fund, it is the fourth-largest holding, at 6.5% of the portfolio. It holds the 11th largest position of the SPDR fund, at 4.3%.

The largest component of the iShares fund, Boeing Co
BA, +0.91%
was the focus of a Trump tweet last week, when he threatened to cancel a Boeing order to build Air Force One planes. Though the stock initially fell as much as 1.3% after the tweet, it subsequently recovered and ended higher on the session.

Despite that, uncertainty over the industry’s prospects under the new administration could be rising. In his tweet on the F-35, Trump added that “billions of dollars can and will be saved on military (and other) purchases” after he is inaugurated on Jan. 20. While no details were provided, the tweet could presage a change in how much is spent on defense, or at least in how it is allocated.

In a note to clients that was published on Dec. 9, J.P. Morgan forecast 4% annual budget growth for U.S. defense between 2017 and 2021, a base case scenario it wrote “is not especially eye-catching,” though it added that previous “up cycles have started from lower levels, with more runway for growth.”

The firm has a neutral rating on Lockheed and wrote that the company was “last in our defense pecking order” because of risk associated with the F-35 program. J.P. Morgan predicted that Lockheed could be called out by Trump, anticipating “a negative stock reaction but not necessarily an enduring one,” noting the short-lived impact on Boeing.

“Moreover, while [the Department of Defense] can push for tougher terms, there is no alternative to F-35 for the U.S. and its allies,” the firm wrote. “In a worst case, F-35 margins will disappoint but the build rate should increase substantially. Nevertheless, administration efforts to change the contracting equation are a risk for the whole industry and one we’ll be monitoring.”

In a statement released after Trump’s tweet on Monday, Jeff Babione, Lockheed’s executive vice president and general manager, said the company “welcome[d] the opportunity to address any questions the president-elect has about the program.”

“Since the beginning, we’ve invested hundreds of millions of dollars to reduce the price of the airplane more than 70%,” the statement continued, projecting that the price of the aircraft would be $85 million in the 2019-2020 timeframe, which it called “an incredible value for anyone operating the airplane.”

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